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Full text of "ANNUAL REPORT - ONTARIO ENERGY BOARD 1968"


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THE ONTARIO ENERGY BOARD 
YEAR ENDING DECEMBER 31,; 1968. 
















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ONTARIO 



TELEPHONE 790 BAY STREET 

365-2851 ONTARIO ENERGY BOARD Toronto 2 



February k, 1969. 

The Honourable J. R. Simonett, 

Minister of Energy (? Resources Management, 

Parliament Buildings, 

Toronto, Ontario. _ 

Sir: 

I have the honour to present the Annual Report 

of the Ontario Energy Board for the calendar year 1966. 

Respectfully submitted, 



<7 




A. R. Crozier, 
Chairman. 



NINTH ANNUAL REPORT 



OF 



THE ONTARIO ENERGY BOARD 



YEAR ENDING DECEMBER 31, 1966. 



INTRODUCTION 

This report is submitted in accordance with section 9 
of The Ontario Energy Board Act, 1964, and it outlines the 
activities of the Board for the calendar year ending December 
31, 1963. 

The Ontario Energy Board acts under the authority of 
The Ontario Energy Board Act, 1964, and amendments, references 
from the Minister of Energy and Resources Management pursuant 
to sections 6 or 10 of The Energy Act, 196i+, those sections of 
The Municipal Franchises Act that pertain to gas, and one section 
of The Assessment Act. 

The functions of the Board are as follows: 

(a) Under The Ontario Energy Board Act. 1964 : 

Approving and fixing the rates and charges for the sale, 
transmission, distribution and storage of gas in the 
Province. 

Granting leave to construct transmission pipe lines, pro- 
duction lines, distribution lines and stations. 

Granting authority to expropriate land for pipe lines and 
stations. 

Recommending designation of lands as gas storage areas. 

Authorizing storage of gas in designated gas storage areas. 

Requiring and regulating the joining of interests in gas 
or oil pools. 

Examining and reporting on any matters pertaining to energy 
referred to the Board by the Lieutenant-Governor in Council, 

(b) Under The Energy Act, 1964 : 

Examining and reporting on certain matters referred to the 
Board by the Minister of Energy and Resources Management. 

( c) Under The Municipal Franchises Act : 

Approving terms and conditions of franchise agreements. 
Granting Certificates of Public Convenience and Necessity. 



Digitized by the Internet Archive 
in 2013 



http://archive.org/details/annualreportonta1968onta 



- 2 - 



(d) Under The Assessment Act : 

Determination of proper classification of pipe lines for 
assessment purposes, when classification as transmission 
lines is in dispute. 



HEARING STATISTICS 

During the year the Board held one hundred and thirteen 

hearings classified as follows: 

The Ontario Energy Board Act, 196^. 

Rates and other charges 

(Section 19) 31 

Leaves to construct transmission pipe lines 

(Section 37) 12 

Expropriations for pipe lines 

(Section kO) J+l 

Joining of interests in oil pool 

(Section Zk) 1 

Drilling of wells in designated gas storage areas 
(Section 23, referred by Minister) k 

Reference by Lieutenant-Governor in Council 

(Section 36) 

Rescinding and Amending Orders 

(Section 30) 7 

The Municipal Franchises Act 

Terms and conditions of gas franchise agreements 
(Section 9). . ..,,,. * £ 

Certificates of Public Convenience and Necessity 
(Section 6) j . . £ 

Total 112 



- 3 - 

GENERAL ADMINISTRATION 

In accordance with the usual practice, the Board held 
its hearings at locations most convenient for the applicants 
and other interested parties. Sixty-two applications were heard 
in various communities outside Toronto. 

The Board held thirteen Board meetings as well as many 
pre-hearing conferences and other meetings during the year. In 
addition, several trips were made to the sites of petroleum and 
natural gas industry projects proposed or under construction. 

Two Board members participated in the 1966 Conference 
of Canadian Public Utilities Commissioners which was held in 
Halifax, Nova Scotia, on June 20th, 21st and 22nd. Representa- 
tives from nine of the provinces studied and discussed a number 
of important problems of rate regulation, including depreciation, 
the impact of inflation on utility financing, contributions in 
aid of construction and acquisitions of plant at nominal cost. 

LEGISLATION 

No amendments were made to The Ontario Energy Board Act, 
1964 at the 1966 session of the Legislature and no changes were 
made to the Board ? s regulations respecting rules of procedure. 

RATES 

During the year the Board heard thirty-four applications 
for the fixing and approving of rates and other charges for the 
sale of gas. About half of these applications were for the 
initiation or continuation of interim rates pending a final 



- k - 

determination by the Board. The other hearings were related 
to the extension of existing rates into areas being served for 
the first time and for rates covering the sale of large volumes 
of gas for industrial use. 

Over one-half of all natural gas sales in the Province 
of Ontario is to industry and this percentage will increase in 
the future. Competition for the industrial energy market is 
keen but the gas utilities, assured of adequate gas supplies 
since the completion of the Great Lakes Gas Transmission Company 
project, have been successfully negotiating with industry for 

(the sale of very large volumes of gas. 
The Union Gas Company of Canada, Limited received Board ' 
approval for a policy of reading meters on a bi-monthly basis 
for residential and small commercial customers. A computer 
estimation, based on historical data and adjusted for average 
temperature variations, is used to calculate the customers bill 
in the intervening month. A considerable saving in meter read- 
ing costs has been realized where bi-monthly reading has been 
introduced. 

The natural gas rates charged by utility companies in 
the Province did not increase during 1967. Operating expenses 
have been increasing, however, and the companies are particularly 
concerned about the rising cost of the capital necessary to 
finance transmission and distribution system extensions. 

The Board keeps a close watch on the level of earnings 
•of all the major gas distributors in the Province and the earn- 
ings of any company will be reviewed at public rate hearings 



- 5 - 

whenever this seems necessary. 

Public hearings on the rates charged by Northern and 
Central Gas Corporation in its Ontario Division will be held 
in 1969, commencing in July. 

APPROVALS AND CERTIFICATES 

During the year the Board approved the terms and condi- 
tions of seven franchise agreements negotiated by natural gas 
distributors with municipalities. Certificates of public con- 
venience and necessity for the distribution of natural gas were 
granted by the Board to companies extending gas service to the 
Townships of Caledon East, Whitby East, Wellesley, Hutchison and 
Seymour. A limited certificate was approved for the Township of 
Brighton and, in addition, certificates were issued for the Vil- 
lage of Port McNicoll and the Police Village of St. Clements. 

With the completion of the Great Lakes Gas Transmission 
Company project, natural gas was made available in the City of 
Sault Ste. Marie and the distribution system was converted from 
propane-air to natural gas in October, 1968. 

JOINING OF INTERESTS FOR THE PRODUCTION OF OIL 

On October 29, 1968, the Board issued an order joining 
the royalty interests within the Gobies Pool, a Cambrian forma- 
tion oil production area. Rayrock Mines Limited, the operator 
of the Pool, the working interests of which are held jointly by 
Rayrock and Bow Valley Leasing Limited, had been unable to 
negotiate a voluntary unitization agreement with all lessors and. 



- 6 - 

without such an agreement, a Board order was necessary to ap- 
portion the royalty benefits of future oil production operations 
on an equitable basis. In making the order, the Board estab- 
lished a unit area for the purpose of drilling and operating 
wells and provided for the initiation and carrying out of second- 
ary recovery operations by means of water flooding. 

Rayrock witnesses presented evidence which indicated 
that total oil recovery from the Pool would be greatly enhanced 
by water flooding operations. 

In dealing with the technical aspects of this applica- 
tion, the Board had valuable assistance from the professional 
staff of the Department of Energy and Resources Management who 
were working at the same time on a related application to the 
Minister for a permit to inject water for the secondary recovery 
of oil. 



CONSTRUCTION OF PIPE LINES 

The Board heard and approved a number of applications 

for leave to construct natural gas transmission pipe lines. The 

major lines approved and constructed during the year were as 

follows: 

a) A 20" United Gas Limited pipe line, 9 miles long, from the 
Township of West Flamborough gate station to a regulating 
station site on Burlington Street in Hamilton. The completion 
of this line provides the Hamilton distribution area with a 
looped high pressure system assuring reliability of supply 
as well as the additional volumes required by the market. 






- 7 -• 

b) An 8" Union Gas Company of Canada, Limited transmission line, 
12 miles long, was constructed from a new valve site on the 
10" Windsor-Port Alma pipe line in the Township of Rochester 
to the Town of Leamington, This line was required to re- 
inforce the gas supply system in the Leamington-Kingsville area. 

c) The Union Gas Company constructed a 15 mile, 12", pipe line 
connecting the existing 26" and 3i+" transmission lines in the 
Township of Lobo with a major city gate station in the southern 
part of the City of London. The rapidly expanding market re- 
quirements in the London, St. Thomas and Talbotville areas 
necessitated this construction. 

d) The Consumers* Gas Company constructed a 4" transmission line 
from the existing Trans-Canada Pipe Line Limited facilities 
in the Township of Brighton to the Town of Campbellf ord, a 
total distance of 13 miles. This line will supply natural gas 
to a new distribution system in the Town of Campbellford as 
well as to customers adjacent to the pipe line route. 

The Union Gas Company also constructed a 20" trans- 
mission line from its Dawn compressor station to Dover Centre, 
a distance of 17 miles. This pipe line, looping an existing 16" 
line, is necessary to meet the growing gas requirements of the 
Windsor-Chatham area and its construction had been approved by 
the Board in 1967 . 

EXPROPRIATION HEARINGS 

After granting leave to construct and following a public 
hearing, the Board may authorize the owner of the pipe line to 



- 8 - 

expropriate land for that purpose. During the year the Board 
held forty-one hearings to expropriate land for pipe lines and 
stations. The public hearings are usually held in the area af- 
fected, in order that the landowners may have the fullest op- 
portunity to be heard. 

In authorizing expropriation, the Board is not empowered 
to deal with compensation matters. In the past, compensation 
has been determined by a board of arbitration appointed by the 
Minister under The Ontario Energy Board Act, I96i+. However, 
with the enactment of The Expropriations Act, 1968-69, com- 
pensation will in future be determined by the Land Compensation 
Board created under that Act. 

As in previous years, the Government again appointed a 
special inspector to act as liaison between the landowners and 
the pipe line company during construction and clean-up periods. 
This inspector also ensures compliance with any terms and con- 
ditions of Board orders related to the construction. 

UNIFORM SYSTEM OF ACCOUNTS 

Significant progress was made in 1968 towards full 
implementation of the prescribed Uniform System of Accounts. 
In particular, the Board issued Accounting Orders to The Con- 
sumers T Gas Company together with Reasons for Decision in which 
the Board supported the conversion of the Company's observed 
depreciation reserve applied to the 1955 redetermined plant 
values, to one based upon an estimated service life basis. The 
Company is proceeding with its detailed accounting studies of 



- 9 - 

post 1955 property transactions and anticipates presenting these 
to the Board for approval as they are completed. 

In December of I96& Northern and Central Gas Corpora- 
tion Limited and Union Gas Company of Canada, Limited presented 
to the Board their respective requests for approvals, consents 
and determinations as provided for in tfiTe Uniform System. The 
Board expects to dispose of these matters in 1969 with the poss- 
ible exception of those dealing with the controversial subject 
of depreciation. Because of the importance of depreciation in 
gas utility accounting and rate-making, this subject will require 
extensive discussions and exchanges of information by the Board, 
its staff and the companies before decisions can be made. 

As in the past the staff of the Board will continue to 
work closely with the staffs of the Gas Utilities in order to 
expedite the full implementation of the Uniform System of Ac- 
counts for all Class "A" Gas Utilities. 

GAS STORAGE 

There were no additional gas storage areas designated 
or authorized for use during the year. The development of the 
Kimball-Colinville Pool was continued by the operator, Tecumseh 
Gas Storage Limited. The company drilled six new wells to in- 
crease the Pool's deliverability capacity and to provide addition- 
al information about the reservoir. 

The storage pools of southwestern Ontario provide as- 
sured service to most of the natural gas customers in the 
Province, not only by way of winter peak shaving but by assur- 



- 10 - 

ing a standby supply of gas that can be drawn on in situations 
where pipe line deliveries cannot, for some reason, meet re- 
quirements. The delay in the construction of the Great Lakes 
project made it necessary for the distribution companies to draw 
additional gas from storage during the 1967-68 heating season 
and the storage pools have been operated on a number of occasions 
to provide gas in emergency situations arising from temporary 
curtailment in pipe line deliveries. 

While there appears to be a sufficient reserve of stor- 
age capacity in southwestern Ontario, the search continued during 
the year for suitable storage formations closer to the major 
market areas. Eastern Ontario especially could benefit from 
the discovery of suitable underground storage and the Board has 
followed closely and with a great deal of interest the develop- 
ment of a potential aquifer (water bearing formation) storage 
pool at Russell, near Ottawa, by The Consumers 1 Gas Company. Most 
indications to date have been favourable and the Company is planning 
a test injection in the near future. The Board granted approval 
for the construction of a temporary transmission line which will 
carry gas for this test injection from the Trans-Canada Pipe 
Lines system. 

Northern and Central Gas Corporation Limited completed 
construction in September of Ontario T s first large scale natural 
gas liquefaction and regasif ication plant at Hagar, near Sudbury. 
The plant has an above ground steel tank storage capacity of 
600,000 MCF and an output capacity of 45,000 MCF per day. The 



- 11 - 

liquefied natural gas plant will be used to improve Northern 
and Central's system load balance and to obtain better utiliza- 
tion of contracted demand gas. This plant and the aquifer stor- 
age formation, if successfully developed, will substantially 
benefit gas customers in eastern and northernOntario. 

PERSONNEL 

The Board presently consists of Mr. A. R. Crozier as 
Chairman, Mr. A. B. Jackson and Mr. I. C. MacNabb as Vice- 
Chairmen and a part-time member, Mr. D. M. Treadgold, Q.C. 

Mr. Henry Strozyk, P.Eng., was appointed Board Engineer 
during the year to bring the staff complement to seven. 



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